Question 167: What type of LC will be used if an Employer needs to recruit senior Employees? Are senior Employees the subjects to participate in compulsory SI?

1.The type of LC to be entered into with senior Employees

The Employer may agree with senior Employees, who have reached the age of retirement as prescribed by law (60 for male and 55 for female)[1], to keep working for the Employer by either extending the LC or entering into a new LC provided that such Employees must be healthy enough according to the advice of a competent medical examination and treatment facility[2]. However, the Labor Code and its guiding documents do not have any more regulations on the types of LC that the Employer may sign with senior Employees. It is logical to understand that senior Employees may not always be healthy enough to do a job of which the start point and the end point are unknown. Moreover, as aforesaid, senior Employees must always be healthy enough during the course of their services and this can only be proved by their health examination certificates. As prescribed, health examination certificates are only valid for 12 months from the date of signing[3].

Therefore, if the Employer needs to recruit senior Employees, the Employer should consider signing definite LCs with terms of not over 12 months each time to ensure senior Employees’ health conditions are in compliance with regulations. Upon expiry of the 12-month term, if senior Employees are still health enough according to their health examination certificates, the Employer may extend the LCs with another 12-month term.

In cases where the Employer has signed indefinite LCs with Employees before they reach the retirement age, the Employer may continue to execute those indefinite LCs. However, the Employer should request Employees to provide qualified health certificates to evaluate their health conditions. If Employees are not healthy enough according to their health examination certificates, the Employer may terminate their LCs[4].

2. Regarding the older Employee’s participation in compulsory SI

The law on SI prescribes that pensioners who are also working under LCs will not be the subjects to participate in compulsory SI[5]. The issue is how a “pensioner” should be defined in accordance with law?

Article 187.1 of the Labor Code prescribes that an Employee must fully satisfy the following two conditions to be entitled to pensions: (i) Employees to reach the retirement age as prescribed (60 for male and 55 for female); and (ii) to have at least 20 years of SI contribution as required by the law on SI[6]. Technically, only if an Employee satisfies the 2 conditions above regarding the age and SI contribution time will they be considered as a pensioner who is not the subject to participate in compulsory SI. Applying these regulations to senior Employees, it is easy to see that senior Employees are not always viewed as pensioners by the above regulations since there is only one condition that they sure satisfy is the retirement age. Therefore, to determine whether a senior Employee is considered a pensioner, it is necessary to take into account the condition on his/her SI contribution time. As such, if senior Employees have not had enough 20 years of SI contribution, which means the conditions for pension entitlement are not fulfilled, they are still the subjects to participate in compulsory SI.

Regarding HI, pensioners are the subjects to participate in HI and HI premiums will be paid by the SI agency[7]. If senior Employees have not had enough 20 years of SI contribution, they must pay HI premiums by themselves at the applicable rate (Employees pay 1,5% and the Employer pays 3% the salary serving as the basis for SI contribution).

Be noted that foreign Employees who are enjoying pensions paid by their countries will obviously not be considered to be eligible to enjoy pensions in accordance with the Vietnamese law.

[1]Articles 166.1 and 187 Labor Code

[2]Article 167.1 Labor Code and Article 6.1 Decree 05/2015/NĐ-CP dated 12/01/2015

[3]Article 8.3 (a) Circular 14/2013/TT-BYT dated 06/5/2014

[4]Article 6.2 Decree 05/2015/NĐ-CP dated 12/01/2015

[5]Article 123.9 Law on SI and Article 43.2 Law on employment

[6]Article 54 Law on SI

[7]Articles 12 and 13 Law on HI